PMP SUMMARY OF FORMULAS SHEETS
Formula Path:
Integration management knowledge area / Initiation process group
1.1 Develop Project Charter / Tools and Techniques
Project Selection methods
Benefit measurement methods
A. Scoring Models or weighted scoring models
B. Benefit/Cost Ratio (BCR)
Compares the benefits to the cost of different projects
BCR> I, benefits are greater than the cost
BCR= I, benefits and costs are same
BCR< I, costs are greater than the benefits.
C. Payback period
Payback period is the length of time it takes the company to get back the initial cost of producing the product or service.
D. Discounted cash flow
Present value (PV) can be found from the formula
PV= FV / (1+i)ⁿ
(PV = Present Value / FV = Future Value / i = Interest rate / n = No of years)
E. Net Present Value (NPV)
The Present value of the total benefits (income or revenue) less the costs. NPV allows calculating the accurate value of the project.
If NPV calculation> 0, then accept the project
If NPV calculation <0, then reject the project.
Formula is complicated.
F. Internal rate of return (IRR)
The rate at which the project inflows and project outflows are equal.
Most difficult method. / Trial & error method
Projects with higher IRR value are profitable.
IRR is the discount rate when NPV = 0.
IRR assumes that cash inflows are reinvested at the IRR value.
Formula Path:
Time management knowledge area / Planning process group
2.9 Schedule Development / Tools and Techniques
Critical Path Method (CPM)
The critical path method is a schedule network analysis technique that is performed using the schedule model.
The critical path method calculates the early start and finishes dates, and late start and finish dates for all schedule activities
TF (F) =LS-ES / TF (F) =LF-EF
ES = Early Start
EF = Early Finish
LS = Late Start
LF = Late Finish
TF = Total Float (Total Slack)
Formula Path:
Time management knowledge area / Planning process group
2.9 Schedule Development / Tools and Techniques
Program Evaluation Review Technique (PERT)
These formulas relate to activities to find the duration and standard deviation for a project. These formulas can also be used for cost estimates
PERT Formulas
PERT or Expected Duration Activity Standard Deviation Activity Variance
(P+4M+O) P-O (P-O)²
6 6 (6)²
(O = Optimistic M = Most likely P = pessimistic)
Formula Path:
Cost management knowledge area / Monitoring and Controlling process group
2.14 Communication Planning / Tools and Techniques
Communication Requirement Analysis
The Impact of the Number of People on Communications Channels
Number Of communication Channels = n (n-1)
2
n= number of people
Formula Path:
Risk management knowledge area / Planning process group
2.18 Quantitative Risk Analysis / Tools and Techniques
Quantitative Risk Analysis and Modeling Techniques
Expected Monetary Value (EMV)
EMV = Probability x Impact
Formula Path:
Procurement management knowledge area / Planning process group
2.20 Plan Purchases and Acquisition / Tools and Techniques
Make or Buy Analysis
Make or Buy Analysis example
You are trying to decide whether to lease or buy an item for your project. The daily lease cost is $120. To purchase the item the investment cost is.$1,000 and the daily cost is $20.
How long will it take for the lease cost to be the same as the purchase cost?
Answer Let D equal the number of days when the purchase and lease costs are equal.
$120 D = $1,000 + $20 D
$120 D - $20 D = $1,000
$100 D = $1,000
D= 10. The lease cost will be the same as the purchase cost after ten days. If you think you will need the item for more than ten days, you should consider
purchasing it to reduce total costs.
Formula Path:
Cost management knowledge area / Monitoring and Controlling process group
Name Formula Interpretation (As of today ... )
Cost Variance (CV) EV-AC NEGATIVE is over budget, POSITIVE is under budget.
NEGATIVE is behind schedule,
Schedule Variance (SV) EV-PV
POSITIVE is ahead of schedule.
EV We are getting $ __ worth of work out of every $1 spent. Funds are or are not
Cost Performance Index (CPI)
AC being used efficiently.
EV
Schedule Performance Index (SPI) We are (only) progressing at __ percent of the rate originally planned.
PV
As of now, how much do we expect the total project to cost? $ __ . See
Estimate at Completion (EAC)
formulas at the left.
BAC Used if no variances from the BAC have occurred or you will continue at
CPI the same rate of spending.
Actual plus a new estimate for remaining work. Used when original
AC+ ETC
estimate was fundamentally flawed.
NOTE: There are many ways to calculate
EAC, depending on the assumptions
made. The first formula to the right is the Actual to date plus remaining budget. Used when current variances are
one most often asked on the exam. AC + (BAC - EV) thought to be atypical of the future. AC plus the remaining value of work to
perform.
AC + (BAC - EV) Actual to date plus remaining budget modified by performance. Used when
CPI current variances are thought to be typical of the future.
Estimate to Complete (ETC) EAC-AC How much more will the project cost?
Variance at Completion (VAC) BAC-EAC How much over or under budget will we be at the end of the project?
4.6 Cost Control / Tools and Techniques
Performance Measurement analysis
Earned Value Management (EVM)
o To perform the EVM calculations, you need to first gather the Three measurements:
Acronym Term Interpretation (As of today ... )
PV Planned Value What is the estimated value of the work planned to be done?
EV Earned Value What is the estimated value of the work actually accomplished?
AC Actual Cost What is the actual cost incurred for the work accomplished?
BAC Budget at Completion How much did we BUDGET for the TOTAL project effort?
EAC Estimate at Completion What do we currently expect the TOTAL project to cost?
ETC Estimate to Complete From this point on, how much MORE do we expect it to cost to finish the
VAC Variance at Completion How much over or under budget do we expect to be at the end of the project?
